A new earnings season has created a rift in corporate America, separating those who are benefiting from the artificial intelligence boom and those who are burdened with the weight of tariffs and inflation. Technology leaders, such as Alphabet and SK Hynix, are starting to deliver numbers that reflect the value of their investments and efforts in artificial intelligence. But firms that are in the face-to-face world of everyday consumer needs are starting to face struggles.
While firms in semiconductors and software are beating consensus, revenue and results for consumer brands including automakers, airlines, food manufacturers, and toy makers are getting hit by weakening demand, increasing input costs, and unpredictable tariffs. This disparity is not only reflected in the market, where high-flying tech stocks are pushing indexes to all-time highs while consumer brands struggle just to meet meaningful profit targets, but also among the people that they’re hiring and the people that they are not.
AI Giants Keep Winning in a Mixed Earnings Season
Google parent Alphabet, India’s Infosys, and chipmaker SK Hynix all beat market expectations this week, crediting their performance to soaring market demand for AI . Alphabet plans to ramp up spending, betting big on the AI boom. SK Hynix, a major supplier to Nvidia, saw record profits as chip buyers stockpiled inventory ahead of potential US tariffs.
Infosys also raised its annual revenue guidance, citing sustained demand from global clients for AI-powered digital services. IBM’s AI business grew 25% year-over-year, reaching $7.5 billion, even though its software and consulting units posted weaker numbers. Tech companies are going full throttle, with AI-driven growth now anchoring investor optimism.
Airlines, Automakers, and Food Brands Feel the Pressure
In sharp contrast, the consumer sector is painting a gloomier picture. Southwest and American Airlines both warned of a slowdown in US travel, citing cautious spending. Food giant Nestle reported softer demand as consumers turn to cheaper alternatives, resisting high prices across categories.
Toymakers Hasbro and Mattel echoed similar concerns, highlighting how tariff-related uncertainties are creating drag. The pattern extends to the auto industry. Hyundai reported a 16% drop in quarterly profits, blaming a $606 million hit from US tariffs. General Motors forecasts an annual tariff-related loss of up to $5 billion.
Even Tesla’s Elon Musk admitted that reduced government support for EVs could result in “a few rough quarters,” after reporting the worst sales drop in over a decade.
US Tariffs Push Costs Higher and Consumer Demand Lower
Trade policy in the US is erratic – it has taken its toll on non-technology related sectors of the economy. Tariffs on metals, auto-parts, and raw materials are adversely impacting their supply-chains and inflating production costs. A Reuters tracker recently reported the full year losses of companies totaled $7.8 billion in the period from July 16 to 22. The losses were mostly suffered in the automotive, aerospace and pharmaceutical sectors.
Coca-Cola, LVMH and other global giants are suffering in the market too, because high interest rates and resilient inflation are causing shoppers to cut back on spending. Unlike tech companies like Apple or AMD, who have enough pricing power and in Apple’s case a tailwind from AI, consumer products companies are much more limited in the tools available to offset costs without upsetting their customers.
Wall Street Cheers AI While Ignoring Consumer Struggles
Despite mixed results across industries, markets remain bullish. The S&P 500 hit a new high, thanks largely to the dominance of the “Magnificent Seven” tech firms, which now account for over 30% of the index’s value. A pending trade deal with the EU and a finalized agreement with Japan further lifted investor sentiment this week.
Bill George, former Medtronic CEO, said it bluntly, AI and banks are racing ahead, while others will struggle to grow. The lowered expectations also help. Earlier in the year, analysts expected 10.2% earnings growth for S&P 500 firms. By July, that forecast dropped to 5.8%. So far, results have landed around 7.7%, enough to keep Wall Street happy.
Why AI Keeps Winning While Traditional Sectors Stall
AI-focused firms are showing resilience and adaptability in a tough macroeconomic environment. Their products feed the very infrastructure that’s powering digital transformation. Meanwhile, traditional businesses tied to physical goods and price-sensitive customers must navigate a harsher landscape.
The widening gap reflects a new reality. The AI earnings surge is more than a trend it’s now shaping the entire market’s direction. As long as demand for intelligent automation and cloud computing stays hot, tech giants will lead, even as consumer brands struggle to hold their ground.
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